INSIGHTS INTO THE FOURTH INDUSTRIAL REVOLUTION - KPC Financial ...
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INSIGHTS INTO THE FOURTH
INDUSTRIAL REVOLUTION
Overview
From handling financial transactions to customer data to placing
orders and tracking inventory to marketing and communications
with a web footprint – very few businesses exist today without the
benefit of technology.
In the past, industrial revolutions made a worldwide economic,
political and social impact on the human race. Consider:
• 1st Industrial Revolution – From 1760 to 1830; involved the rise
of steam engines and railways
• 2nd Industrial Revolution – From 1925 to 1944; introduced
electricity, crude oil and gas
• 3rd Industrial Revolution – Starting in 1969, launched
electronics, telecommunications and computers, which
The Fourth Industrial enabled new avenues for space expedition and biotechnology.
Revolution is a
technology revolution, The Fourth Industrial Revolution (4IR) is no different; it is simply
the most recent chapter in the story of human progress. And yet, its
and nearly every
transformative power is expected to generate up to $3.7 trillion in
country, business and economic and societal value within the next four years.1
household across the
globe is an integral “The Fourth Industrial Revolution is moving faster than expected and
part of it. impacting lives around the world.”2
Global Lighthouse Network
Over the past several years, the World Economic Forum has identified
more than 60 companies globally as Fourth Industrial Revolution
leaders. They have been designated as advanced manufacturing
“lighthouses” for demonstrating operational and financial success by
innovating new systems and transforming the way people work and use
technology. These companies are considered the blueprint for how to
modernize and scale a business operating system.3
Perhaps more than any other industrial revolution, the recent
technological transformation is more global. In response, the goal
of the World Economic Forum is to establish a global platform for
technology governance. Composed of governments, industries,
startups, civil society, academia and international organizations, these
stakeholders have come together to create a policy framework that will
shape and oversee the relationship between technology and society.
This includes the development of policies and a regulatory framework
for emerging technologies such as artificial intelligence, autonomous
mobility and precision medicine.Tech projects fall into the following categories:
• Autonomous and Urban Mobility
• Healthcare Data Policy
• Internet of Things, Robotics
• Smart Cities and Agile Governance
• Data Free Flow with Trust (DFFT)
• Data for Common Purpose Initiative (DCPI)
• Ethical AI Facial Recognition
• Future of Protein
• Circular Economy Projects
Teams within the Forum are working across the network to support
cross-border data flows, flexible data-governance models, health data
sharing agreements and sustainable rural mobility systems.4
A key reason why it is critical to harness these technologies and share
them across the globe is because our economies are so interconnected
among nations worldwide. To various extents, we all rely on other
countries for raw materials, labor, manufacturing and shipping
capabilities as well as innovation, research and development.
Environmental Sustainability
One of the objectives of the Fourth Industrial Revolution is to use
technology to produce more sustainable solutions with less impact on
the environment. Combining the digital with the physical world will
allow us to drive productivity well beyond current levels, shorten cycle
times, reduce energy consumption and, in general, do more with less.
In fact, many lighthouse manufacturers have created new revenue
streams while building a carbon-neutral manufacturing ecosystem.
They have combined initiatives to reduce waste, resource consumption
and emissions while driving profitable growth. To wit, 53% have
developed measurable environmental sustainability benefits, including
a near total reduction in CO2 emissions, double-digit increases in
efficiency and a substantial reduction in the use of raw materials.5
U.S. Lighthouses
Perhaps of greatest concern to Americans is that U.S. manufacturing
companies lag Fourth Industrial Revolution innovations in other
countries. As many as 70% of manufacturers are currently incapable
of scaling their operations, which puts the U.S. at a higher risk of
permanently falling behind.6 Among the 69 lighthouses currently
recognized worldwide, only seven are in the U.S.7
Ericsson (Lewisville, Texas) – Ericsson, a Swedish networking and
telecommunications company, built a U.S.-based, 5G-enabled digital
native factory in Texas. This factory utilizes a robust “Internet of Things”
(IoT) architecture that has increased output per employee by 120% and
reduced lead time by 75% and inventory by 50%.
Procter & Gamble (Lima, Ohio) – After P&G’s Lima plant invested in
supply chain flexibility, advanced analytics and robotic automation, itwas able to increase its speed to market for new products tenfold and became two times better than competitors at avoiding running out of inventory. Johnson & Johnson Vision Care (Jacksonville, Florida) – Vision Care implemented reconfigurable manufacturing to digitally connect its value chain end to end from suppliers to consumers, leading to double- digit cost reduction and sales growth. Zymergen (Emeryville, California) – This bio-engineering site is using robotics and artificial intelligence to replace manual processes, yielding twice its innovation rate. DCP Midstream (Denver, Colorado) – This oil and gas producer developed internal digital solutions and tech-venture partnerships to integrate the remote control of operations (i.e., planning, logistics, commercial systems), resulting in real-time optimization of margins and more than $50 million in value. Schneider Electric (Lexington, Kentucky) – This 60-year-old facility implemented Fourth Industrial Revolution technologies to generate end-to-end transformation of operations from supplier to customer. These changes enhanced demand forecast accuracy by 20%, reduced energy costs by 26% and improved customer satisfaction by 20%. Fast Radius with UPS (Chicago, Illinois) – This additive manufacturer uses industrial-grade 3D printing and a proprietary operating system to design and produce customized products and facilitate fast turnaround and global fulfilment with real-time analytics. “Digitization is going to touch every aspect of our business … it will just be so imbued into every process, every function, every connection that we make.”8 Society 5.0: Smart Cities “Society 5.0” represents a new era in which technology is seamlessly integrated into our daily lives, with data as the new capital and digital networking acting as global connective tissue. We are now using tech innovation to address all of our primary challenges in society, which in recent years have been dominated by the pandemic, climate change and the progressive aging of the world’s population.9 Integrating the potential of digital technologies with human needs aligns with the futuristic vision of smart cities. Last year, Japan enacted the Super City Law, which is designed to improve collaboration between the public and private sectors to create digitally transformed cities. A select pilot group of Super Cities will deploy AI and big data for consumer-use applications of medical care, education, energy, crime prevention and transportation, including the use of autonomous vehicles.
The Super City Law authorizes the appointment of “smart city
architects” to coordinate services and technology in their regions.
This will help ensure that siloed agencies cooperate and systems are
interoperable across different jurisdictions. These changes are being
driven by a younger generation of municipal and public sector leaders
determined to overcome institutional resilience and radically overhaul
public services through new technologies. Instead of cities and the
private sector working in isolation, the goal is to adopt sensible
technology policies to integrate fragmented systems and negotiate
with global vendors through a consolidated procurement process.
Moving forward, these digital initiatives are being used to drive Japan’s
economic recovery and create long-term sustainable growth while
meeting the needs of citizens. Examples include implementing local
5G and regional broadband wireless access and accelerating online
medical services.10
U.S. Smart Cities
In the U.S., we also have smart cities working to deploy connected
technologies and IoT solutions to improve traffic flow and mobility,
public safety, efficiencies in city lighting, and environmental and
wastewater management as well as reduce energy use.
U.S. cities that have been identified as meeting the criteria for smart,
sustainable urban development, technology innovation and social
responsibility include:11
• Dallas, Texas • Washington D.C.
• Chicago, Illinois • Boston, Massachusetts
• Austin, Texas • Pittsburgh, Pennsylvania
• Seattle, Washington • Boulder, Colorado
• Charlotte, North Carolina • San Jose, California
• San Francisco, California • New York, New York
Final Thoughts
Investing is a forward-looking endeavor. While many established
companies have delivered sound investment returns and dividends
for decades, they are often in a latter stage of their life cycle with less
opportunity for substantial growth. However, that is not always the case.
For example, companies like Procter & Gamble and Johnson & Johnson
have proven that they can embrace new technologies and use them to
improve product launches and operational margins as well as predict
accurate inventory usage – even during a once-in-a-century pandemic.
While new, innovative tech companies tend to grab headlines with IPOs
and impressive short-term returns, it just goes to show that even “old
dogs” can learn new tricks. The same goes for investors. Diversifying a
portfolio among new firms developing emerging technologies as well
as proven blue-chip companies can offer the potential for both growth
and income. Consult with your financial professional about ways to
incorporate participants of the Fourth Industrial Revolution to take
advantage of the changes that might be coming our way.1
Francisco Betti and Enno de Boer. World Economic Forum. December 2019. “Insights from the
Forefront of the Fourth Industrial Revolution.” http://www3.weforum.org/docs/WEF_Global_
Lighthouse_Network.pdf. Accessed June 21, 2021.
2
World Economic Forum. April 5, 2021. “Japan Takes Leadership Role in Fourth Industrial
Revolution Global Summit.” https://www.weforum.org/press/2021/04/japan-takes-leadership-
role-in-fourth-industrial-revolution-global-summit-5626acf5c9/. Accessed June 21, 2021.
3
Francisco Betti and Enno de Boer. World Economic Forum. Dec. 2019. “Insights from the
Forefront of the Fourth Industrial Revolution.” http://www3.weforum.org/docs/WEF_Global_
Lighthouse_Network.pdf. Accessed June 21, 2021.
4
Chizura Suga. World Economic Forum. 2021. “Centre for the Fourth Industrial Revolution
Japan.” https://www.weforum.org/centre-for-the-fourth-industrial-revolution-japan. Accessed
June 21, 2021.
5
Enno de Boer, Katy George and Yves Giraud. McKinsey & Company. April 7, 2021. “CEO
dialogue: Perspectives on reimagining operations for growth.” https://www.mckinsey.com/
business-functions/operations/our-insights/ceo-dialogue-perspectives-on-reimagining-
operations-for-growth. Accessed June 21, 2021.
6
Patrick Burson. Supply Chain Management Review. Feb. 6, 2020. “Global Lighthouse Network:
Insights from the Forefront of the Fourth Industrial Revolution.” https://www.scmr.com/article/
global_lighthouse_network_insights_from_the_forefront_of_the_fourth_industr. Accessed
June 21, 2021.
7
Enno de Boer and Katy George. World Economic Forum/McKinsey & Company. March 2021.
“Global Lighthouse Network: Reimagining Operations for Growth.” http://www3.weforum.org/
docs/WEF_GLN_2021_Reimagining_Operations_for_Growth.pdf. Accessed June 21, 2021.
8
Enno de Boer, Katy George and Yves Giraud. McKinsey & Company. April 7, 2021. “CEO
dialogue: Perspectives on reimagining operations for growth.” https://www.mckinsey.com/
business-functions/operations/our-insights/ceo-dialogue-perspectives-on-reimagining-
operations-for-growth. Accessed June 21, 2021.
9
Chizura Suga. World Economic Forum. 2021. “Centre for the Fourth Industrial Revolution
Japan.” https://www.weforum.org/centre-for-the-fourth-industrial-revolution-japan. Accessed
June 21, 2021.
10
Yuta Hirayama and Rushi Rama. World Economic Forum. April 6, 2021. “Japan’s smart city
initiatives will play key role in its digitization and economic revival.” https://www.weforum.org/
agenda/2021/04/japan-smart-city-initiatives-digitisation-economic-revival-gtgs/. Accessed
June 21, 2021.
11
Jayna Locke. Digi. Oct. 9, 2020. “Top 12 Smart Cities in the U.S. - Smart Cities Examples 2020.”
https://www.digi.com/blog/post/smart-cities-in-the-us-examples. Accessed June 21, 2021.
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